Asian shares rose the most in a month on Monday, boosted by a rise in technology shares and data showing regional manufacturing activity is picking up.
Stocks in Australia, Japan and Hong Kong rose, pushing the MSCI Asia Pacific Index to its biggest gain since early May. Indian stock futures jumped after exit polls indicated a landslide victory for Prime Minister Narendra Modi’s party.
Positive Asian data
Stocks also rose on Monday, boosted by data showing an improvement in the outlook for Asia's manufacturing sector, with Japan's manufacturing activity reading rising above 50 (the dividing line between expansion and contraction) for the first time in a year in May.
Data from Korea and Taiwan also showed gains, but political events could lead to volatility, with tensions escalating around the Middle East and the US elections.
US interest rate expectations
Sentiment has been boosted by the dollar’s weakness in recent weeks, as investors hope the Federal Reserve will finally start easing monetary policy. On Friday, the core personal consumption expenditures index, the Fed’s preferred inflation gauge, showed its smallest increase this year.
“We’re starting to see some of the U.S. data softening, and if we can see a gradual decline in inflation, global markets could very well improve,” Naomi Fink, a strategist at Nikko Asset Management, told Bloomberg TV.
Australian bond yields fell, while US 10-year Treasury yields were little changed.
soft landing scenario
“While this may not be enough to trigger a near-term rate cut, we believe recent data continues to support our base case for a soft landing, which should allow the Fed to begin easing policy later this year, with the first cut likely at its September meeting, we expect,” Solita Marsili, chief investment officer for the Americas at UBS Wealth Management, said in a note.
Oil prices have been volatile after the OPEC+ alliance laid out a plan to restore some production as early as October, despite concerns about the demand outlook and strong supplies from outside the group.
A strong offering for Aramco
Meanwhile, Saudi Aramco sold $12 billion worth of shares shortly after the offering began on Sunday, a boost for the Saudi government as it seeks funds to help pay for a massive economic transformation plan.
While the size of overseas demand for Aramco’s latest offering is not known, subscription data reflects participation from a mix of local and foreign investors, people familiar with the matter told Bloomberg News.
In Mexico, Claudia Sheinbaum is set to become the country's first female president in a landslide victory, building on the popularity of outgoing President Andres Manuel Lopez Obrador but inheriting a legacy of rampant criminal violence and a huge fiscal deficit left by his government.
Traders will be closely watching inflation data from emerging markets including Indonesia, South Korea and Chile this week, as well as growth data from Australia and Europe. The European Central Bank could cut interest rates for the first time this session at its meeting on Thursday, which would send the euro lower, while the U.S. jobs report is due on Friday.
